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Foot Locker Q4 Earnings Beat

Zacks Equity Research

Driven by significant initiatives undertaken towards achieving its long-term goals, Foot Locker, Inc. (FL) posted record fourth quarter and fiscal 2013 results. The company’s quarterly adjusted earnings of 82 cents surged 28% year over year, substantially ahead of the Zacks Consensus Estimate of 75 cents. On a reported basis, the company’s earnings soared 19% to 81 cents a share.

Driven by a 5.3% rise in comparable-store sales (comps), Foot Locker’s sales for the quarter escalated 4.6% year over year to $1,791 million and handily surpassed the Zacks Consensus Estimate of $1,775 million.

Gross profit for the quarter climbed 3.2% to $582 million. However, gross margin contracted 50 basis points (bps) to 32.5%.

Full Year 2013

For the full year, the company’s earnings witnessed a double-digit rise for the fourth consecutive time. Adjusted earnings of $2.87 per share increased 16% year over year, surpassing the Zacks Consensus Estimate of $2.79 a share. On a reported basis, earnings jumped 10.5% to $2.85 per share.

Total sales for the year advanced 5.2% to $6,505 million, reaching its record high till date, and beating the Zacks Consensus Estimate of $6,484 million, driven by a 4.2% rise in comps.

Stores Update

During the year, Foot Locker introduced 84 new outlets, shut down 140 outlets and relocated 320 outlets. As of Feb 1, 2014, the company operated 3,473 stores across 23 countries in North America, Europe, Australia, and New Zealand. Apart from this, the company has 46 franchised Foot Locker stores in the Middle East and South Korea. Moreover, in Germany and Switzerland, Foot Locker owns 27 franchised Runners Point and Sidestep stores.

Financial Details

Foot Locker ended the year with cash, cash equivalents and short-term investments of $867 million, total debt of $139 million and total shareholders equity of $2,496 million. Its merchandise inventories stood at $1,220 million, compared to $1,167 million last year.

During the year the company bought back 6.4 million of its common shares worth $229 million, which includes 1.6 million shares repurchased by the company in the fourth quarter.

Based on its stable financial position, management hiked its quarterly dividend by 10% to 22 cents a share and also approved a capital expenditure worth $220 million for fiscal 2014. The dividend will be payable to stockholders of record as on Apr 17, 2014, on May 2, 2014.

Conclusion and Outlook

Foot Locker seems quite impressed with its performance in 2013. Also, it believes that by continuing to exploit opportunities like children’s business, its shop-in-shop expansion in collaboration with its vendors, development of its store banner.com and enhancement of its assortments, it is likely to attain new heights in the coming years.

Going forward, the company expects to work on its store restructuring plans, increase its investments in technology in Europe and also further its women’s business, which makes management hopeful of achieving its operational objectives.

For 2014, the company envisions mid-single digit growth in comps and a double digit rise in earnings per share. The current Zacks Consensus Estimate for 2014 earnings is pegged at $3.12 per share.

Other Stocks to Consider

This global shoe retailer currently holds a Zacks Rank #3 (Hold). However, other better-ranked stocks in the same sector include Christopher & Banks Corporation (CBK), with a Zacks Rank #1 (Strong Buy), Belle International Holdings Limited (BELLY) and H & M Hennes & Mauritz AB (publ) (HNNMY), both sporting a Zacks Rank #2 (Buy).

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Read the Full Research Report on HNNMY
Read the Full Research Report on CBK
Read the Full Research Report on BELLY

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